Sterling remains one of the better performers against the dollar this year with the BoE less dovish than the Fed – something that could improve its interest rate differential
UK inflation, which is due tomorrow and just one day before the Bank of England provides an update on, is expected to drop notably. This is required for the BoE’s lofty forecast of 2% inflation by mid-year to materialize.
However, the recent persistence in US inflation has sent the dollar higher against a number of G7 currencies. The RSI identified the GBP/USD peak and the pair is now testing the prior high of 1.2736 but as support this time. The potential for choppy price action remains, given the number of major central banks meeting this week and given the fact it is very unlikely for any movement apart from the Bank of Japan.
Additionally, the 50 SMA acts as dynamic resistance – potentially slowing the move to the upside. The euro remains devoid of a longer-term bullish move especially when factoring in Europe’s poor fundamentals . A close below 0.8560 may open the door for bears to send prices back towards channel support but a week full of major central bank announcements may result on choppy, non-directional moves.
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